Is there a way to break a trust?

My brother in law has mental
disabilities and his care worker
embezzled all if his money. There is a
criminal process in work. I was told
that if the care worker put his money in
a trust that we will never be able to
get it back. Is there a legal way to
break a trust that was created for
illegal purposes?

Asked on August 24, 2018 under Estate Planning, Nevada

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

Yes, there are several doctrine that could let you break a trust created or used for illegal purposes.
1) As a general matter, there is no right to keep stolen goods or money; the thief has to return it and cannot hide it behind a trust. In this event, the law will look at the reality of the situation and disregard a trust set up by the criminal to hide criminal proceeds.
2) A criminal or fraudulent transfer of money or other assets may be voided or undone by courts, so even if the trust is legitimate (e.g. set up in the past, for proper purposes), under the fraudulent transfers act (all states have a version of this law), the transaction of putting the money into the trust can be reserved or undone.
3) A trust created specifically for an illegal purpose can often be dissolved entirely, since the law does not allow contracts, trusts, or other acts entered into or created to violate the law (e.g. to steal): the law's general provisions overrule the specific documents, etc. creating the trust, when the trust is used to violate the law.
There are ways to get the money back, but they are complicated in that given the high degree of protection given to an otherwise-properly set-up trust, very specific things, generally with a higher-than-normal standard of evidence or proof, have to be shown to overcome the trust. A lawyer should be hired by your brother's legal guardian (e.g. you, if you are it) for this purpose.


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